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Financial Accelerator Theory and the Russian Mortgage Market

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  • Stolbov, M.

    (Moscow State Institute of International Relations (University) Ministry of Foreign Affairs of the Russian Federation, Moscow, Russia)

Abstract

In the article the analysis of the crisis impact on the Russian mortgage market is carried out from the financial accelerator perspective. It is proved that the level of financial sustainability of banks and lenders shortly before the crisis predetermined their performance during the most acute phase of the turmoil. The loan-to-value and payment-income ratios have a non-linear link with mortgage loan refinancing volumes in the secondary market. In the primary market excessive mortgage indebtedness measured as a share of mortgage portfolio to total consumer loans outstanding determined the relative importance of financial accelerator mechanism in a given region. In complete accordance with the "flight to quality" effect closely related to the financial accelerator mechanism, the biggest Russian banks and the entities controlled by non-residents with particular emphasis on mortgage lending turned out to be the most successful players in the mortgage market during the crisis. In the regional dimension the "flight to quality" effect led to the shrinkage of interregional mortgage loans as well as to the increase of the share of the Moscow based banks' in the market. These trends were discovered by means of Grubel-Lloyd index.

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Bibliographic Info

Article provided by New Economic Association in its journal Journal of the New Economic Association.

Volume (Year): 13 (2012)
Issue (Month): 1 ()
Pages: 79-98

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Handle: RePEc:nea:journl:y:2012:i:13:p:79-98

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Keywords: mortgage lending; financial accelerator; wealth effect; loan-to-value ratio; collateral constraint; budget constraint; "flight to quality" effect;

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References

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  1. Janine Aron & John V. Duca & John Muellbauer & Keiko Murata & Anthony Murphy, 2010. "Credit, housing collateral and consumption: evidence from the UK, Japan and the US," Working Papers 1002, Federal Reserve Bank of Dallas.
  2. Christopher D. Carroll & Misuzu Otsuka & Jiri Slacalek, 2011. "How Large Are Housing and Financial Wealth Effects? A New Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(1), pages 55-79, 02.
  3. Case, Karl E. & Quigley, John M. & Shiller, Robert J., 2012. "Comparing Wealth Effects: The Stock Market versus The Housing Market," Department of Economics, Working Paper Series qt6px1d1sc, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  4. Fabio Natalucci & Andrew Levin, 2003. "The Non-Linearity of the Financial Accelerator," Computing in Economics and Finance 2003 130, Society for Computational Economics.
  5. Bernanke, Ben & Gertler, Mark & Gilchrist, Simon, 1996. "The Financial Accelerator and the Flight to Quality," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 1-15, February.
  6. Richard Disney & Sarah Bridges & John Gathergood, . "Housing Wealth and Household Indebtedness: Is there a Household ‘Financial Accelerator’?," Discussion Papers 06/01, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
  7. Dell’Ariccia, G. & Igan, D. & Laeven, L., 2009. "Credit Booms and Lending Standards: Evidence from the Subprime Mortgage Market," Discussion Paper 2009-46 S, Tilburg University, Center for Economic Research.
  8. N. Kosareva & A. Tumanov., 2007. "Evaluation of Housing Affordability in Russia," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 7.
  9. M. Stolbov., 2009. "The Evolution of Monetary Theories of Business Cycles," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 7.
  10. Matteo Iacoviello & Stefano Neri, 2007. "Housing Market Spillovers: Evidence from an Estimated DSGE Model," Boston College Working Papers in Economics 659, Boston College Department of Economics, revised 23 Oct 2009.
  11. Matteo Iacoviello, 2005. "House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle," American Economic Review, American Economic Association, vol. 95(3), pages 739-764, June.
  12. Ben Bernanke & Mark Gertler & Simon Gilchrist, 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," NBER Working Papers 6455, National Bureau of Economic Research, Inc.
  13. Heitor Almeida & Murillo Campello & Crocker Liu, 2006. "The Financial Accelerator: Evidence from International Housing Markets," Review of Finance, European Finance Association, vol. 10(3), pages 321-352, September.
  14. Sternik, G., 2009. "Recession in the Market of Residential Construction and Real Estate in Russia," Journal of the New Economic Association, New Economic Association, issue 3-4, pages 185-207.
  15. Maria Concetta Chiuri & Tullio Jappelli, 2000. "Financial Market Imperfections and Home Ownership: A Comparative Study," CSEF Working Papers 44, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 01 Dec 2000.
  16. Vahram Stepanyan & Tigran Poghosyan & Aidyn Bibolov, 2010. "House Price Determinants in Selected Countries of the Former Soviet Union," IMF Working Papers 10/104, International Monetary Fund.
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